DISCONTINUED OPERATIONS AND OTHER DIVESTITURES |
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| Discontinued Operations and Disposal Groups [Abstract] | Ìý | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DISCONTINUED OPERATIONS AND OTHER DIVESTITURES |
DISCONTINUED OPERATIONS AND OTHER DIVESTITURES The Company continuously assesses the composition of its portfolio to ensure it is aligned with its strategic objectives and positioned to maximize growth and return to shareholders.
Jeans Business
On May 22, 2019, ±«ÓãÖ±²¥ completed the spin-off its Jeans business, which included the Wrangler®, Lee® and Rock & Republic® brands, as well as the ±«ÓãÖ±²¥ OutletTM business, into an independent, publicly traded company now operating under the name Kontoor Brands, Inc. ("Kontoor Brands") and trading under the symbol "KTB" on the New York Stock Exchange. The spin-off was effected through a distribution to ±«ÓãÖ±²¥ shareholders of one share of Kontoor Brands common stock for every seven shares of ±«ÓãÖ±²¥ common stock held on the record date of May 10, 2019. Accordingly, the Company has reported the results of the Jeans business and the related cash flows as discontinued operations in the Consolidated Statements of Income and Consolidated Statements of Cash Flows, respectively, and presented the related assets and liabilities as assets and liabilities of discontinued operations in the Consolidated Balance Sheets, through the date the spin-off was completed.
In connection with the spin-off, Kontoor Brands entered into a credit agreement with respect to $1.55 billion in senior secured credit facilities consisting of a senior secured five-year $750.0 million term loan A facility, a senior secured seven-year $300.0 million term loan B facility and a five-year $500.0 million senior secured revolving credit facility (collectively, the "Kontoor Credit Facilities"). Prior to the effective date of the spin-off, Kontoor Brands incurred $1.05 billion of indebtedness under the Kontoor Credit Facilities, which was primarily used to fund a transfer of $906.1 million to ±«ÓãÖ±²¥ and its subsidiaries, net of $126.8 million of cash received from ±«ÓãÖ±²¥. As a result of the spin-off, ±«ÓãÖ±²¥ divested net assets of $54.9 million, including the indebtedness under the Kontoor Credit Facilities. Also included in the net assets divested was $75.3 million of net accumulated other comprehensive losses attributable to the Jeans business, primarily related to foreign currency translation.
The results of the Wrangler®, Lee® and Rock & Republic® brands were previously reported in the Jeans segment, the results of the Wrangler® RIGGS brand were previously reported in the Work segment, and the results of the non-±«ÓãÖ±²¥ products sold in ±«ÓãÖ±²¥ OutletTM stores were previously reported in the Other category included in the reconciliation of segment revenues and segment profit. The results of the Jeans business recorded in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statements of Income were a loss of $48.0 million for the six months ended September 2019, and income of $91.0 million and $189.6 million for the three and six months ended September 2018, respectively.
Certain corporate overhead costs and segment costs previously allocated to the Jeans business for segment reporting purposes did not qualify for classification within discontinued operations and have been reallocated to continuing operations. The results of the Jeans business reported as discontinued operations include $59.5 million of separation and related expenses during the six months ended September 2019.
In connection with the spin-off of the Jeans business, the Company entered into several agreements with Kontoor Brands that govern the relationship of the parties following the spin-off including the Separation and Distribution Agreement, the Tax Matters Agreement, the Transition Services Agreement, the ±«ÓãÖ±²¥ Intellectual Property License Agreement and the Employee Matters Agreement. Under the terms of the Transition Services Agreement, the Company and Kontoor Brands agreed to provide each other certain transitional services including information technology, information management, human resources, employee benefits administration, supply chain, facilities, and other limited finance and accounting related services for periods up to 24 months. Payments and operating expense reimbursements for transition services are recorded within the reportable segments or within the corporate and other expenses line item, in the reconciliation of segment profit in Note 15, based on the function providing the service.
Nautica® Brand Business
During the three months ended December 30, 2017, the Company reached the strategic decision to exit the Nautica® brand business, and determined that it met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the results of the Nautica® brand business and the related cash flows as discontinued operations in the Consolidated Statements of Income and Consolidated Statements of Cash Flows, respectively, and presented the related held-for-sale assets and liabilities as assets and liabilities of discontinued operations in the Consolidated Balance Sheets, through the date of sale.
On April 30, 2018, ±«ÓãÖ±²¥ completed the sale of the Nautica® brand business. The Company received proceeds of $285.8 million, net of cash sold, resulting in a final after-tax loss on sale of $38.2 million, including a $5.0 million decrease in the estimated loss on sale that was recorded in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statement of Income for the six months ended September 2018.
The results of the Nautica® brand business recorded in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statement of Income were income of $0.4 million (including a $5.0 million decrease in the estimated loss on sale) for the six months ended September 2018.
Under the terms of the transition services agreement, the Company provided certain services for periods up to 12 months from the closing date of the transaction. Revenue and related expense items associated with the transition services were recorded in the Other category, and operating expense reimbursements were recorded within the corporate and other expenses line item, in the reconciliation of segment revenues and segment profit in Note 15.
Summarized Discontinued Operations Financial Information
The following table summarizes the major line items for the Jeans business and Nautica® brand business that are included in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statements of Income:
The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued operations for each of the periods presented:
Reef® Brand Business
During the three months ended September 2018, the Company reached the decision to sell the Reef® brand business, which was included in the Active segment. The Company determined the associated assets and liabilities met the held‑for‑sale accounting criteria and were classified accordingly in the September 2018 Consolidated Balance Sheet.
±«ÓãÖ±²¥ signed a definitive agreement for the sale of the Reef® brand business on October 2, 2018, and completed the transaction on October 26, 2018. ±«ÓãÖ±²¥ received cash proceeds of $139.4 million, and recorded a $14.4 million final loss on sale for the year ended March 2019, of which an estimated $9.9 million loss was recorded in the three months ended September 2018 based on the anticipated terms of the sale. The loss was included in the other income (expense), net line item in the Consolidated Statement of Income.
Van Moer Business
During the three months ended September 2018, the Company reached the decision to sell the Van Moer business, which was acquired in connection with the Williamson-Dickie business and included in the Work segment. The Company determined the associated assets and liabilities of the business met the held‑for‑sale accounting criteria and were classified accordingly in the September 2018 Consolidated Balance Sheet.
±«ÓãÖ±²¥ completed the sale of the Van Moer business on October 5, 2018, and received cash proceeds of €7.0 million ($8.1 million). ±«ÓãÖ±²¥ recorded a $22.4 million final loss on sale, which was included in the other income (expense), net line item in the Consolidated Statement of Income for the three months ended September 2018.
Summarized Held-for-Sale Financial Information
The following table presents the assets and liabilities of the Reef® brand and Van Moer businesses at September 2018:
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